Unemployment, Part-time Workers and Obamacare

When the most recent unemployment data was released just a couple of days after the second Presidential debate, there was some speculation that the numbers were “rigged” or “fudged”. We’ve been saying for a long time that even though they should be two sides of the same coin, the “Employment” numbers don’t track with the “Unemployment” numbers.

Basically, what the comparison chart shows is that unemployment is falling faster than employment is rising. Historically, in a recovery employment rises faster than unemployment falls.

But this time somehow “magically” unemployment is falling faster than employment is rising. How can that be?

Discouraged Workers are not the Answer

Some possible explanations up until this point were that people had given up looking for work (became “discouraged workers”) and so they were no longer counted as unemployed under the standard U-3 definition. This would of course make the U-3 number look better but wouldn’t indicate an improving economy. However logical this possibility sounds, the data does not hold up. If we look at the Bureau of Labor Statistics numbers for Unemployed persons by duration of unemployment we can see that the number of people unemployed for more than 27 weeks in September 2011 was 6,217,000 but in September 2012 that number had fallen to 4,835,000 so the long term unemployed had fallen considerably.

In the table below we see the number of “discouraged workers” in thousands according to the Bureau of Labor Statistics. Once again we see the number of discouraged workers declining.

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2002

328

375

330

320

414

342

405

378

392

359

385

403

2003

449

450

474

437

482

478

470

503

388

462

457

433

2004

432

484

514

492

476

478

504

534

412

429

392

442

2005

515

485

480

393

392

476

499

384

362

392

404

451

2006

396

386

451

381

323

481

428

448

325

331

349

274

2007

442

375

381

399

368

401

367

392

276

320

349

363

2008

467

396

401

412

400

420

461

381

467

484

608

642

2009

734

731

685

740

792

793

796

758

706

808

861

929

2010

1065

1204

994

1197

1083

1207

1185

1110

1209

1219

1282

1318

2011

993

1020

921

989

822

982

1119

977

1037

967

1096

945

2012

1059

1006

865

968

830

821

852

844

802

Accounting Tricks of Another Sort: Part-Time Employment

But there is another issue, i.e. part-time employment and that is where the discrepancy appears to be. According to the Bureau of Labor Statistics (BLS) Glossary:

The BLS calculates Unemployment using the “Current Population Survey” a household survey and they calculate Employmentusing the “National Compensation Survey” which is a separate survey of employers. For more information see Current Unemployment Rate on how Unemployment and Employment are calculated.

But the problem comes because under the “Current Population Survey” workers are considered full-time if they work more than 35 hours a week but under the “National Compensation Survey” the BLS says “Employees are classified as full time or part time as defined by their employer.”

So right off the bat we have a different definition of “Full-Time” employment. So we have the beginning of a problem. As long as employers consider full-time more than 35 hours a week there is no problem, but if for some reason employers changed their classification we could see a divergence between the employment numbers and the unemployment numbers such as I noted in the above mentioned article.

The Law of Unintended Consequences

As mentioned in the article Unintended Consequencesof Well-Intended Policies all governmental policies have unintended consequences and with the thousands of pages of hastily written law in Obama Care there are probably hundreds, if not thousands, of unintended consequences. One such consequence is related to section 1513 sub-section 4 Paragraph A which says, “The term ‘full-time employee’ means, with respect to any month, an employee who is employed on average at least 30 hours of service per week.” So basically, Obamacare has rewritten employment law and changed the definition from 35 hours a week as defined by the Bureau of Labor Statistics to 30 hours a week as defined by Obamacare.

So what are the unintended consequences?

If you owned a company and you had to provide certain health care benefits to full-time employees but not to part-time employees, and those benefits would drastically reduce your profitability, what would you do? The fact is, many companies in their reporting under the “National Compensation Survey” for the employment statistics chose 35 or 40 hours as their definition of a full-time employee. But now they are being forced to change that definition to 30 hours. Therefore, they are cutting the number of hours they are giving to employees from 35 to 28 or 29 hours a week. But they still have the same number of hours of work to do. So they then turn around and hire more people to work less than 28 hours a week to cover the extra labor done by the employees whose hours were cut. So one obvious unintended consequence of Obamacare is that many minimum wage workers will have their hours cut.

This is exactly what is happening, the most recent employment statistics (for September 2012) showed a massive surge in part-time employment of +582,000. Some speculated that a large portion of them came as a result of increases in campaign staff and people trying to sign up unregistered voters. But it is quite possible that these part-time jobs came from companies cutting their regular workers and hiring make-up workers so their average number of hours worked would be below the 30 hour limit.

The Unemployment Loophole-

Work 1 hour a week and you are no longer “unemployed”

Also interestingly, the BLS defines part-time as “those who worked 1 to 34 hours during the survey reference week”.So if you work as little as one hour a week you are no longer “unemployed”. And so by changing the definition of part-time and thus increasing the number of part-time workers (even though no more total hours are worked) the unemployment rate magically goes down! Under this logic, all the government has to do is say that anyone who works more than 20 hours is full time and the unemployment rate will magically fall to below 5%.

Whether unintended or not, it is all slight of hand and does not help the economy. After all, even if you are classified as “employed” rather than “unemployed” who can support their family by working one hour a week? The numbers may look better but, the fact remains that people are underemployed and so we see college grads are working part-time minimum wage jobs and people are having difficulty making end meet.

Latest Unemployment News

The U.S. Bureau of Labor Statistics (BLS) released the February Unemployment figures on Friday March 6th. According to the BLS the Current Unemployment Rate (Seasonally adjusted) for February was 5.5% down from … [Read More...]

What is the True Unemployment Rate?
Comparing Bureau of Labor Statistics numbers to an Independent Source
There has been a lot of talk about the validity of the government generated unemployment … [Read More...]

Last week we published an article titled Gallup Head Says Unemployment Rate is “A Big Lie” in it we said that, the big news is that Jim Clifton the CEO of Gallup said that unemployment is really closer to 9%. … [Read More...]

Articles by Category

Articles by Date

Disclaimer

At UnemploymentData.com we are not registered investment advisors and do not provide any individualized advice. Past performance is not necessarily indicative of future performance and future accuracy and profitable results cannot be guaranteed.